Review of the Cheba Hut Franchise Opp and Startup Costs

Apr 3, 2014

The smell of a toasted sub is something that can make any stomach rumble with hunger. Even the memory of a great toasted sub is enough to spur many people to head on out to grab a bite to eat at their favorite sandwich place! There are many big names that dominate the sandwich industry, but these big names don’t necessarily provide the quality and service that the local customer demands. If your community is desperate for an awesome sandwich, then it might be the right time to invest into a Cheba Hut franchise.

Why Choose Cheba Hut As a Franchise Opportunity?

Cheba Hut is a corporation that focuses on the counter-culture revolution. Rather than focus on big corporate idealism to maximize the amount of money that gets taken out of a customer’s product, this business focuses on providing a great sandwich using fresh ingredients at a fair price.

It is also a small chain of restaurants right now with just 15 locations nationwide. These locations are in highly profitably locations, especially university campuses, and this helps to fuel the incoming revenues because the marketing efforts of this brand target the college-aged consumer. Because of this focused marketing effort, the brand was able to experience almost 30% growth when the industry was trending downward because of the recession. Same store sales increased on average by 12%.

How Much Does It Cost To Invest Into a Cheba Hut Franchise?

The initial franchise fee for a Cheba Hut is $35,000. The organization encourages multiple locations per owner, however, so each additional franchise that an owner purchases after the initial one has a fee of $20,000. There is no direct financing for these fees, but Cheba Hut does have relationships with third party vendors that can be beneficial to some owners.

The support that you receive from Cheba Hut begins before you even pay your franchise fee. They’ll discuss with you their unique formula for success and how they work with college campuses and the youthful generation to drive sales within each location. About 2 months before you open your franchise, you’ll also be given 10 days of intensive training about how:

Your investment will also be given ongoing support with new product updates, training that is ongoing, and other specialized support that you may need. Absentee owners are not part of this program. Cheba Hut wants people who are actively involved in their franchise and willing to get their hands “toasted” to help it succeed!

Are There Other Requirements That Must Be Met?

Unlike other franchises, there are no baseline net worth requirements or liquid capital requirements that are used as a screening tool to eliminate fringe investors. Cheba Hut takes each application for a franchise extremely seriously and looks at it as an opportunity to interview you to see what your business skills happen to be. This fits in line with the counter-culture idealism that this brand was initially founded upon in the late 1990′s. It’s not about creating big business. It’s about creating your business!

There are, however, royalty fees that are mandatory with your franchise once it has its grand opening. The general royalty is 4% of gross sales and is a royalty that must be paid weekly. This is advertised as being 33% lower than other franchise opportunities, but many other general royalties also include marketing and advertising when they are higher and Cheba Hut’s does not.

There’s also a 2% marketing royalty that must be paid, also on a weekly basis from the gross revenues of the store. This helps to establish the brand identity in each community, including your own, and specifically target the college-aged consumer that has been the modicum of growth or this business, especially in the last 5 years.

The typical investment needed to open a new Cheba Hut is about $250,000 on average. It has been as low as $178,000 for some owners, while the highest franchise start-up cost in the organization has been $338,500. There is a required timeframe to startup your franchise from the initial application and payment of the fee that is a maximum of 9 months. Most, however, are started within 6 months of conceptualization.

Can You Raise Money For Your Business?

The other unique aspect of Cheba Hut is that they really encourage a debt-free profile as much as possible. To this extent, one of the initial questions that you’re asked on your franchisee application is whether or not you have the ability to raise $200,000 in capital without needing to obtain a business loan. This could be through additional investors, crowdfunding sources, or your own contacts that can help you bring in some liquid capital.

Cheba Hut has three initial locations where they’d love to have a franchise, which means if you’re in Austin, TX, Ann Arbor, MI, or in Northern California, you’ll have a leg up on your ability to get a franchise. The focus of Cheba Hut is on the West Coast or the Midwestern United States, so as long as you’re in those regions, you’ll receive strong consideration. Other locations for franchises will be considered on a case-by-case basis.

The profitability and sustainability of the Cheba Hut brand is proven. It may market itself in a unique way, but this brand identity has allowed it to establish itself as one of the fastest growing restaurant chains in its specialty right now. There might be big competition from other national brands, but those brands won’t have what you have – a local identity, fair pricing, and the ability to establish relationships with your local neighborhood.

Is Cheba Hut the right investment to make for you? If you love a toasted sub, then it could be! Contact Cheba Hut directly for more information about your unique finances and circumstances to see if it is the right opportunity for you.

After being physically and mentally disabled by a brain tumor, Brandon overcame the odds to regain his health to help his pregnant wife in her fight against stage 3 breast cancer. A couple of years later he launched his blog. Today over 1 million business owners read his blog every month. Read Brandon's inspirational comeback story here.